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UK Deming Newsletter 7 • 1 June 2000 • ISSN: 1470-5672

At the 1999 British Deming Association Forum Jim McIngvale gave a spirited account of the progress he was making with the support of Deming's ideas in his retail business [Houston's Gallery Furniture]. Jim's talk was accompanied by a dynamic powerpoint presentation that he prepared with his son James. It is unfortunate that powerpoint does not translate into e-mail [UKDN was originally published as plain text email - if you have a copy of the original powerpoint please let me have it - Alan] , but here at least is what Jim said. Prof Henry Neave did the hard bit of transcribing [thanks Henry]; all I have done is to run it through a US English spell checker in deference to the speaker. So a big thank you to Jim for permission to include this in UKDN.

It is perhaps appropriate that I am writing this in Nigeria where the results of 'commission based pay' are manifest in poor roads, telephones, and a host of other ways. CBP exists here in a very extreme form -- bribery and related forms of corruption. As Alfie Kohn says, people do what they need to do to get the reward and in the process they lose sight of the purpose. But there is another way and Jim's experience in the retail furniture business is great testimony to this.

Jim McIngvale

.... I would like to let you know that I will be talking today in this Texas drawl, and I will be speaking in gusts of up to 1000 words a minute. So please try to keep up with me.

The nature of my talk is: how to be successful with hard work and dedication and application of Dr Deming's methods. What I am about to say in the next hour is my point of view, my view of the world, and it certainly has worked for myself and Gallery Furniture.

But before I launch into this semi-brilliant dissertation, I want to give you some of my less illustrious background, so hopefully you will know where I am not coming from.

You see, I was doing real well about 20 short years ago. I was 28 years old. I was living at home with my folks in Dallas, Texas where I grew up. And I had kind of a menial job: I was stacking groceries, making about three bucks an hour. Now there's nothing wrong with stacking groceries, nothing wrong with making minimum wage. But I kind of thought that with my college education and my background maybe I should be doing something a little better than that. Anyway, I had a bad attitude. The convenience store I was working at - it was located in a rough neighborhood there in Northeast Dallas - was called a "Stop-and-Rob".

And one day the boss walked in, and looked over at me and said: "Son," he said, "Son, you've got a bad attitude." And I said: "Uh-huh, Sir. Yes Sir, I know it Sir. I'm trying to change." He said: "Well, Son, I'm going to help you change." And the thoughts raced in my mind: How is this man going to help me change? A raise, a promotion, what's he going to do for me? I said: "Sir, that's great. How are you going to help me change?" And he said: "Boy, you're fired." I said "Oh no", and I went home that night to my folks' house, and went into a depression for several weeks. You see, I felt sorry for myself. I felt like I was a victim of circumstances.

And after about three weeks, I woke up kinda early one Sunday morning there in my folks' house, and stumbled into the room where the television was. And I turned the television on. And there was a religious program on that Sunday morning. Now, I didn't really want to look at any religion out of the television, but the preacher was preaching a message. He was a famous American evangelist. I'd like to tell everybody here today that a miracle happened that Sunday morning. You see, the miracle was, that Sunday morning: that evangelist was not asking for any money! But he was preaching a message, and the message was that the greatest challenge that we all have from our Creator is to use our talents. He said: "Get up, go to work, and make something out of your life."

So I decided to do that, and I went out the next day and I got a job in a small furniture store there in Dallas. And I found a niche in life. I found something I was good at: I was good at retailing and working with customers. And after about 19 months I began to dream of maybe having my own store. I didn't want to set up there in Dallas where I grew up at, because my boss had taught me the business - he was my mentor. So I asked him in late 1980 where it would be a good place to start a furniture store somewhere in Texas other than in Dallas. He said: "Kid, I understand Houston is a boom town: try Houston." And my brother George at that time was in Houston in the real estate business. So he spent about three or four weeks looking, and he got me a location. He called me up one night and we finalized the deal.

And that night I went out to dinner with my girlfriend; her name was Linda. She'd grown up through all my ups and downs. She got in the car that night, and I was all excited. I said: "Linda, I've got great news for you tonight." She said: "What's that, Mac?" I said: "We're going to move to Houston; we're going to get into the furniture business." She said: "There ain't no way." I said: "Linda, you don't understand something. We're going to move to Houston, get into the furniture business. We might just do well, we might make some money." She said: "Look, Mac, you don't understand something. All my friends live here in Dallas. I went to school here, I've got a good job. I'm not moving to Houston, I'm not getting into the furniture business with you."

Well, I had learned that, if you're going to be successful in business and in life, above all you have to be persistent, never give up. So I kept asking her that night, and asking her and asking her. Finally, about 11 o'clock, I asked her about the 40th time, and she got very frustrated with me. She slammed her hand down on the dashboard and said: "I'll tell you what, Mac." She said: "I'll move to Houston, I'll get into the furniture business with you. But you're going to have to marry me first." And I got to thinking - this woman has put me on a difficult decision. But then I came up with what I considered to be an entrepreneurial brainstorm. I thought to myself: Where else can I get an employee this cheap? I said: "You got a deal."

We moved to Houston in April 1981 to start this business. We only had $5000. But we had a dream, we had a lot of desire. We did fairly well the first couple of years. In 1981 we did a million dollars of sales volume. In 1982 we did two million dollars in sales volume. And our marketing strategy those first two years was very simple. Strictly we appealed to all those people that were moving to Houston to get jobs in the booming oil and gas business back then.

But then in January of 1983 the boom in the retail business in Houston turned into a giant bust, and the bottom fell out of the market. And overnight oar sales went from $50000 a week down to about $5000 a week, and we were just about ready to go broke. We had no backup capital, no bank loans, no investors, nowhere to turn to.

I knew that if we were going to save the business we had to start advertising on television, appealing to a broader spectrum of the market. So in February of 1983 1 made a leap of faith. I took the last $10,000 that we had and I bet the entire company on television advertising. I bought $5,000 worth of TV spots on two independent television stations there in Houston. I took my money, I shoved it in the middle of the table, we bet the entire company on television advertising. However, before I could start running those television spots, I had to make three 30-second commercials that we could rotate on the airwaves. So I went into a little television station in Houston late one night in February 1983. From 11.00 at night to 2.00 in the morning they charged me $500 for three hours worth of production time, and my goal that night was to make three TV spots. Well, I got in front of those television cameras. I was totally intimidated, and I just froze up, and I started stuttering and stammering, and I couldn't come up with the punch line. And it got to be 1.00, and by 2.00 my three hours was up and still I hadn't even made one 30-second TV spot. And the producer got very frustrated. He said: "Mac, you've got one more take; if you blow this you're going to lose your $500 investment."

So I made the first 25 seconds of my 30-second pitch. And I had the day's receipts in my pocket. Out of sheer frustration I pulled the money out of my pocket and I said: "And Gallery Furniture will save you money". By the way, I was using dollars, not pounds. And the production manager said: "That's enough - let's go home." But, anyway, I took that TV spot and we correlated into a successful business. And here I am 18 years later, and the sales last year at Gallery Furniture were $100m. We still only have one store, never borrowed any money, never had a bank loan, never had any investors. And one of the things I am most proud of is the fact that the last ten years in a row my television ads have been voted by the marketing students there at the University of Houston as the worst television ads in Houston.

But I'm here today to talk about our transformation using the Deming management method. So, here we go. Ready to roll.

Gallery Furniture

I think any business has to have a unique selling feature. In other words, what is it that this company does that the other companies can't do, won't do, or are unable to do, that gives them an advantage over their competitors? When I first started in the furniture business in Houston, I noticed that, in almost every store in Houston, when you bought a piece of furniture, the quickest you could get it was two weeks and more than likely six or eight weeks. And I looked at a lot of successful companies there in the United States, people like Federal Express, Walmart, United Parcel Systems, Southwest Airlines: people that were doing things better, faster, and cheaper. So from Day 1 we decided our unique selling feature at Gallery Furniture would be immediate delivery. Customers buy furniture at our store, and we deliver it within three or four hours.

We had a customer buying furniture a couple of Saturdays ago. It was a very unusual situation. Her house had burned down. She came in and bought $46000 worth of furniture on a Saturday night. It was 7.00 when we finished typing the ticket. She lived about 60 miles from our store, and by Saturday night at I 1.00 we had delivered the furniture - the 60 miles, all $46000 worth of it - delivered it, set it up in her house, and we were gone. That's what we do. Our unique selling feature at Gallery Furniture is immediate delivery.

I think, if we are going to be successful in business, we all have to ask ourselves this question: Would the customer miss this company if it was to go out of business tomorrow?

I think: Yes, they would miss us at Gallery Furniture because of our unique selling feature -- immediate delivery.

But the thing that survived the company through its first eight or nine years, in spite of all my management mistakes, was my marketing strategy: which is quite brilliant. Let me tell you what it is: Late to bed, early to rise, work like hell, and advertise!

Now, I was taught management at the University of Texas. And we had a very conventional management structure - that's the way I was taught. We had somebody at the top issuing all the orders, coming down throughout the Organization. And we did fairly well the first four or five years. But then, as the business got bigger toward the end of the 1980s and 1990, we lurched from one crisis to the next We made the same mistake over and over and over again. I knew there had to be a better way, and I was searching for a better way.

The first thing I did as far as quality was concerned: I went to a conference with a guy named Philip Crosby down in Orlando, Florida. He had written a book called Quality is Free. I read that book and it talked about Zero Defects, and I got all excited about it. That was the management flavor for the month. The problem with Zero Defects is, to my way of thinking, it meant that you had to do things right all the time. And that's certainly an impossibility. So I was very frustrated.

We were a very sales-driven company back then - we still are. The heart and soul of our business is our employees, of course, but most especially our salespeople. We had salespeople who were commission-compensated because that's the way I thought would get the best productivity out of the salespeople. We had a system that created winners and losers.

In our commission-based sales structure for the first eight or nine years at Gallery Furniture, we had a weekly quota the salespeople had to meet. They had to do $7000 a week in furniture sales and $400 a week in chemical add-on sales to get a 10% commission of $700 a week. Most of them, if they did that, would make anywhere from $700 to $1000 a week. However, if they didn't make that quota on a weekly basis (the week ran from Friday to the following Thursday night) - if they only did $6000 that week (because their son was ill and they had to take off a couple of days or whatever) they became a loser, and they only made 5% commission or $300 a week. Obviously this created a lot of anxiety, and the focus of all the salespeople, because of the way the system was set up, was to make that quota every single week. However, as I was to learn from Dr Deming, this was judging performance using arbitrary goals, which fostered short-term thinking - the only thing they cared about was: Did I make my quota this week? Misguided focus. The focus was not at all on the customer. The focus was: How much money can I make off this customer? They would prejudge every customer before they walked in the door based on the type of car they drove in on. If they drove up in a big Mercedes, they'd get a lot of service. If they arrived in an old Ford Taurus, they wouldn't get any.

It created a lot of internal conflict. What type of internal conflict? Well, the salespeople hated having new salespeople hired on the floor, because they felt like it would cut into their commission. They felt like if there were only 50 salespeople they could sell more than if there were 60 or 70. And so they made it very difficult for the new salespeople to hang on; they would try intentionally to run them off the floor, because they perceived these people as a threat to their income. I'll never forget, one new guy came in one day, and he had his lunch in a paper bag, and left it in the back of the break-room. And they went back and put a whole load of Cayenne Peppers throughout his lunch, trying to run him off. So it created a lot of internal conflict.

Also, judging performance using arbitrary goals fostered a giant amount of fudging of the figures. If the week ended on Thursday and the salesperson had his figure for the week, he would call off all the Thursday night deliveries he had and postpone them till the Friday or Saturday to give him a good start to the next week. It didn't matter that the customer didn't like this. All that mattered was: What's good for me as far as my income is concerned? And, if they had a short week where they hadn't made their quota, it was not unusual at all on Thursday night for salespeople to have as much as two or three thousand dollars worth of furniture that was going to be delivered in two or three weeks delivered to their garage so that they could say they got it on the week's quota.

It was a very bad system. It also caused greater fear in the workplace. The fear came from a ranking. We ranked all of our salespeople: I thought that was the way to do it. At one point we had as many as 100 salespeople there. And we'd rank them at the end of every month from I to 100. The top 10 people were viewed as superstars and the other 90 as losers. We almost went to the level of firing the bottom 10 every month to get rid of these people.

It was only at a Deming seminar that I got a blinding flash of the obvious. At my first Deming seminar I learned that, in any distribution of people, half will be below average.

To say the least, we were on a roller-coaster of highs and lows. We would have a great month one month and a very poor one the next. After the poor month we would start another flavor-of-the-month program, another round of firings of the below-average performers, another new sales contest, more incentives - and it all caused more problems for the business. Dr Deming calls this tampering and, believe me, I did lots of it.

The salespeople working there had one mentality. And that was: "Everything other than sales is not my job." They spent most of their time between customers - and there was a lot of time between customers back then, because we had nothing near the customer flow then as we do now - they would spend most of the time between customers either reading or looking at girlie magazines or figuring their commission. It was not a good use of human resources.

And at that point I came to the realization that, unless things changed,, they would probably stay the same or more than likely get worse. This business was so frustrating to me. I spent half of my time arguing, settling commission arguments between salespeople. The other half of my time I spent putting out one fire after another after we disappointed the customers.

So in August of 1990 I was looking for a better way to run the business. I attended a life-changing event: that was my first four-day seminar taught by Dr Deming at the Sheraton Airport Hotel in Houston.

Now, I only stayed for three out of those four days that time because his concepts of cooperation and win-win were so radical and off-center to me. I had grown up in a world of competition: I win, you lose - beat the other guy. I had grown up in a world of incentives. I had grown up in a world of building superstar mentality. However, I knew in my heart that he was right, and that he was certainly on to something.

I went to two more Deming four-day seminars in the fall of 1990 and then one in January of 1991 in California. And, at the urging of Dr Deming and of Dr Edward Baker who at that time worked for the Ford Motor Company, we decided in March of 1991 to do away with our commission scheme, and pay all the salespeople salary based upon their years of service to the business. We consulted a late 20th century philosopher about this change, and he said it was indeed a "Radical move, Dude".

Dr Deming taught me to see the Organization as a system. As Mr Scholtes talked about today, the entire Organization is a system: we got furniture products from our suppliers, we added value to them, we distributed them to our customers, we got feedback from the customers on what they liked and didn't like, and started all over again.

We started to see the business as a system, asking ourselves internally in the business: "What can I do for you to make your job easier, and what can you do for me?" We wanted all the employees to come up to the level of being improvement project players.

When we made the change from commission to salary, a lot of the hotshot salespeople who were making lots of money left; they didn't want to be part of this new thing. And my friends in the furniture business from across the United States told me that I was crazy to do this: it had never been done before. And they told me that paying people salary without incentives was a certain way to ruin the business, and would be the ruination of Gallery Furniture.

However I believed in what Dr Deming said, and we decided we would indeed give it a go and see if we could make it work. We decided, if we were going to build the business, we had to identify customers' needs and concerns. Before the Deming transformation, we had a team of three or four professional furniture buyers who would go to all the furniture markets. In between, they would sit at their desks and read computer flows, and try to figure out how much furniture to order each week. They felt like it was beneath them as professional furniture buyers to ever go on the sales-floor and talk to customers. And they didn't treat the salespeople well at all: they thought it was beneath them to even talk to the salespeople. However, after the Deming transformation, we took all those people - some of them left, some of them stayed with us - and put them on the sales-floor so that they could listen to the voice of the customer every single day and get feedback from the customers on what the customer wanted to buy. This made a tremendous difference as we started to identify customers' needs and concerns. And people started to perform in harmony like members of a symphony orchestra.

Dr Deming taught me to create the business where we had 100 winners, not ten out of 100, but all hundred salespeople felt like outstanding people, felt like winners.

He taught me about quality. The quality of our product, our service to our customers - that's what we're selling, the service and the furniture - is the direct result of:

how well the different parts of the Organization work together,

how well the salespeople work with the people in data-processing who were typing the customers' tickets,

how well the people answered the phone and told the customer when their delivery would be made,

how professional the delivery people were when they got to the customer's home.

Before, we had contract delivery people. And when they got to a lady's home - she was an elderly lady, and she wanted them to move her sofa out from her living room to the garage, they would charge her an extra $20 to do that. But now that all the delivery people were paid salary rather than incentive pay, they would do that just to help the lady out - which was the right thing to do in the first place.

The quality of the company, Gallery Furniture, is certainly dependent on how well the different people work together. And we started to work on getting a different profile of salesperson. We wanted people who would cooperate and could work together. In the old days we were looking for racehorse-type used-car salesman. That was the best commission profile - a racehorse-type used-car salesman. Nowadays we look for a totally different profile: we're looking for turtles with a fast twitch.

Dr Deming taught us how to work with the system and manage the white spaces, increase the number of positive interactions between people and groups, and create more cooperation. We were looking for people who could get along with each other, who could work together, who liked retailing because of the joy of working with customers, who didn't focus all day on how much money they were going to make. He talked to us about managing the white space, increasing the number of positive interactions between people and dependence.

And he taught us the aim of the system, the system being a network of interdependent components that work together to accomplish the aim of the system. 'Me aim of our system was real simple: to please customers, sell furniture, produce income. That's the only reason we were there.

And he talked about system management. A system, the Gallery Furniture system, must be managed. It will not manage itself. Left to themselves, components become selfish, competitive. The secret is cooperation between components toward the aim of Gallery Furniture.

We spent lots of time, and we still do, talking about the vision and the aim of the company. The aim is to please customers, sell furniture, produce income. We molded the entire Organization after we made the Deming transformation to face the customer. And we asked ourselves every single day, all day long: Would the customer pay me for what I am currently doing? If not, why are we doing it?

We're interested in customers. Most businesses our size, $100m, would have four or five people in an accounts-payable department. We don't have an accounts-payable department. When we get a shipment of furniture or whatever we're buying from our supplier, we pay cash on delivery for all of it. The reason is that, that way, one person does the entire amount of payables and the other people in the Organization, all 249 of them, can work with the customer. We don't have to match up the invoices three weeks later. We get all the employees having daily contact with the customer, and we spend our time on revenue-generating activities, and all that starts and ends with the customer. What else is there?

As Peter [Scholtes - Peter spoke earlier in the day] talked about earlier, I have disciplined myself and the Organization to focus on the critical few issues, not the trivial many. And the critical few issues are: pleasing customers, selling furniture, producing income, getting the whole group to work together as a system to delight customers.

Before, in the 1980s, we managed the business with chimneys of excellence. Every department had a quota and a budget, and they were expected to stand up by themselves. We had the sales department, we had the pickup department, the data-processing, the receiving, the delivery department, the back office. And every one of them had their own little chimney of excellence. They would never talk to the other departments; they were almost in competition with each other. Dr Deming taught me this was the wrong way for the company to function. There was no optimization of the whole, no way to best serve the customer. So, for example, it was not unusual for those salespeople to make a sale at 10.00 at night and promise the customer we would be there before midnight. There's no way we could sell the furniture by 10.00, pull it, prepare it, inspect it, and get there before midnight. They didn't care because they were gone. But the delivery people would stay up until 2.00 in the morning.

Dr Deming said that we should "Improve constantly and forever the system of production and service, and improve quality and productivity, and thus constantly decrease costs". That's what we are trying to do. And "Break down the barriers between the departments. People in Research, Design, Sales and Production must work together as a team to perceive problems in production and in use that may be encountered with the product or the service." For example, in the furniture business in the United States, they keep making the furniture bigger and bigger and bigger. We have lots of sofas now that are as long as 103 inches. And the people in Sales have to talk to the people in Delivery and then they have to talk to the customers to see if this giant sofa is going to go in their home. Nothing's more frustrating to a customer than to buy this sofa, and when we try to get it in their house we can't get it in: we tear up their wall, we tear up the sofa; nobody's happy. But unless the salespeople talk to the people that are doing the delivery where they see the business from a more holistic standpoint, they never know.

We decided we would have to "Institute leadership. The aim of leadership should be to help people and machines and gadgets to do a better job. Leadership of management is in need of overhaul as well as leadership of production workers." The problem with the entire business started with me, it started at the top. And I have learned over the years that people look to the leader, they look to their boss. How I say "Hello" to somebody when I walk in has a profound effect on these people. I must lead from the front; I must set a good example for these people. That's why, when customers walk into the store, my office is at the front desk. I work Saturdays and Sundays and nights and holidays because, if I ask the rest of the employees to do it, if I'm going to be a leader then I need to lead from the front, not from the rear.

Dr Deming said that optimization is "the process of orchestrating the efforts of all components toward the achievement of the stated aim". We have everybody in that business going in one direction because the train moves a lot faster if you're all pulling in the same direction. Our direction is real simple: please customers, sell furniture, produce income. That's what we're in this for.

Now, all this Deming stuff is fine in theory. However, what about the bottom line? Does Gallery Furniture indeed walk the walk and talk the talk that I'm espousing up here today?

When we made the switch from commission to salary in 1991, we decided to allow all the full-time employees in the business share in the progress of the company. So we have a quarterly profit-sharing, gain-sharing meeting where we go over the goals of the company, how we are doing, how we are treating our customers, every quarter. In our profit-sharing program that we instituted after we adopted the Deming philosophy, 5% of all store-profits every quarter gets divided equally among all the employees, regardless of their job-title. Somebody might be the senior salesperson, and the other person might be a warehouse person, but they all get the profit-sharing divided equally. We're trying to recognize the fact that everybody has an important role in our singular task of delighting customers: sales, managers, receiving people, delivery people. And we also do something called a gain-sharing program, where 20% of our company profit gains (in other words the profit gains if we do better first quarter 1999 versus first quarter 1998) also goes to the employees in the form of long-term type of retirement benefit.

The bottom line

Since 1993 we have put into those two accounts for the employees $6.6m, over and above the better-than-average salary the people at Gallery Furniture make.

And if you subscribe to the theory that success is measured by results, here's our results. In 1991, when we started the Deming process, we were doing about $30m in sales. 1998: our sales were right at $100m, and this year we're on track to do about $120m. If success is measured by results, we've indeed been successful using Dr Deming's quality improvement methods.

The core, the heart of Gallery Furniture still, as it was in the 1980s, is the salespeople. They're the people that, when the rubber hits the road, have the most dealing with the customers. In 1989, what did the salespeople do? They did sales. Everything else was "It's not my job", and they wouldn't do it. What do the salespeople do now? They do sales, they do inventory control, they move the furniture in the store, housekeeping, supervise the playground, display the room full of furniture. They do multitudinous tasks. And you know what? When they do different tasks, the job is not as boring to them and they get energized more often.

Deming's Theorem No. 1: We're ruined by best efforts. I never worked as hard in my life as I did from 1981 to 1989, and 1990, and 1991. But I was being ruined by my best efforts, because I could have been working smarter; instead, I was working harder.

Deming's Theorem No. 2: Does anybody give a hoot about profit? Believe me, we're not in this for altruistic reasons. The reason we are using the Deming process is because it is a better form of capitalism. We are able to make more money that way, and benefit the community more, and benefit our employees, and benefit the bottom line of the company.

We had a decision to make in 1991 when Dr Deming and Dr Baker asked me to switch those salespeople from commission to salary. it was a bet-the-company type of decision. We could keep going the way we were and get quick returns - we were making money back then - or we could choose the Deming method for long-term prosperity. We chose the Deming method. And here's what happened.

We were able to improve the quality of our services and our products to our customers. No longer, when I went in the grocery store and saw one of our customers, did I have to hear a horror story from them about how their delivery went. We were able to decrease costs, improve productivity. When we went from commission to salary, the sales per employee went through the roof We were able to decrease our prices to sell better-quality furniture to our customers at lower prices. Some of our prices right now in 1999 are lower than they were in 1989.

We were able to increase the size of the market, not only for ourselves but for our competitors as well. Dr Deming says that you have to have good competitors, and we certainly have some good ones. We were able to stay in business to provide jobs and get a return on investment - the Deming chain reaction.

When we do the Deming process, we also work very hard every day on what's called the Plan-Do-Check-Act. Plan a test or a change aimed at improvement; Do it on a small scale; Check what the results say; Adopt the change, abandon, or run through the cycle. We are trying to continuously improve the furniture store.

In the old way, the way we ran the business in the 1980s, we were worried about quantity; today we worry about quality. The old way was competition among all the salespeople; today it's cooperation. The way the system works now is that, if a customer walks in and is greeted by a salesman who reminds her of her ex-husband, he will give up that customer to somebody who is not so offensive to her, and will make the sale. Before, we never had a chance to make a sale like that because they wouldn't give it up for fear of losing the commission. Before, it was: I win, you lose. Now it is win-win. Before, it was: Please the boss. Now the company is focused on pleasing the customer, because, in the end, the boss is the customer. They're the ones writing the pay-checks. Before, when a problem happened, it was scapegoating: who's to blame? Now, when a problem happens, we try to improve the system so that we can work that problem out of the system for ever.

Before, everything was status quo. Now we understand variation. One of the things that bothers me a little bit about our customers is - it's amazing, as Peter talked about this morning - customers don't understand variation. So many of our customers expect the furniture, when we deliver it to be absolutely perfect because they don't know anything about variation. I can't tell you how many customers meet our delivery trucks at the kerb at night and immediately take a flashlight and start going over the furniture to try to see any imperfections. One of our delivery people's tongue slipped the other day: He said: "Ma'am, did you inspect your husband with a flashlight before you married him?"

The old way was individually-oriented; now it's team-oriented. The old way we had these salespeople, they were not satisfied: they all wanted to make a million dollars a year. We had entrepreneurs. Now we have people who value security more and long-term stability. And, believe me, those people are a whole lot better at our job of retailing. Before, we would inspect the performance; now we inspect team-effort. Before, it was command-and-control type of management; now we try to be more compassionate, more caring and understand that people do a good job if given the chance. Before, it was short-term thinking. How much did we sell today? Now it's long-term thinking. Before, people could complete their education; now it's life-long learning. Before, we feared change. Now we embrace change - we rehearse it's the only way we're going to get better. In the 1980s, my idea of business was that the way to solve any problems was to ride into town like John Wayne, the lone-ranger cowboy, and solve all the problems by yourself. Dr Deming taught me a better way. He taught me that, if we are going to raise the barn, we need to raise the barn together.

Transformation of my managerial thinking

On my part, this has been a tremendous transformation of management thinking. Before, we focused on individual events, firefighting, taking names. Now we view the company as a whole: we do not focus on individual events.

Before, we said goodbye to below-average staff. Now we regard the employees as the most important assets that we have. Before, we got frustrated because people didn't get my hyperactive message. Now I understand that different people learn in different ways, and we appreciate diversity. Before, we would meet and dwell ad infinitum on problems. Now it's made management's job harder: management needs to do fire-prevention not fire-fighting. Management needs to figure out how to improve the system to get better results. Before, we ignored the potential of competent people. Now we have found out that lots of people have lots to contribute, and will contribute a lot if only given the chance.

Dr Deming talks about innovation: he talks about staying ahead of the customer. And one of the things I have learned as we go into the 21st century is something called the experience economy - one of the ways we are changing Gallery Furniture to face the customer better.

This is an article by Joseph Pine and James Gilmore in the Harvard Business Review. The entire history of economic progress can be recapitulated in the four-stage evolution of the birthday cake. As a vestige of the agrarian economy, mothers made birthday cakes from scratch - mixing farm commodities: flour, sugar, butter and eggs. They cost mere dimes when Johnny and Mary had a birthday party. As the goods-based industrial economy advanced, Moms paid a dollar or two to Betty Crocker for pre-mixed ingredients. Later, when the service economy took hold, busy parents ordered cakes from the bakery or grocery store which cost 10 to 15 dollars, ten times as much as the pre-packaged ingredients. Now, in the style of the 1990s, parents neither make the birthday cake nor even throw the party. Instead they spend $100 or more to outsource the entire event to Chukky Cheese, McDonalds, or the Discovery Zone, or some other business, to stage as a memorable event for the kids - and often throws in the cakes for free. Welcome to the emerging experience economy.

So at Gallery Furniture, what we've tried to do is help our customers have a memorable experience. After 18 years, our customers now expect better quality furniture, lower prices, faster delivery. The question which the customers ask every day is: "What have you done for me lately?" And that's what they should ask. So we have to constantly stay ahead of the customer.

Here are some of the comments cards from some of our customers.

"We had the pleasure of Ike as our salesperson - very cheerful and pleasant, gentlemanly, honest and helpful. It makes a difference with customers with certain employees. We will look forward to our furniture in our new home."

"I came into buy a mattress and a headboard and footboard. I had looked extensively on a previous visit. Everyone was wonderful. It took two minutes to choose the mattress and five minutes to choose the frame. And three minutes to check out."

Fabulous. We wished all of our customers bought that fast!

"Dear Mac, I would like to thank you for the type of environment that you and your staff have created. No hassles, no sales-pitches, and things for the children to do. Thank you."

"From the time I called to the time I left it was a great experience. (Ike 0 a super-cool guy. I did what I had to do - even got some awesome bargains. You keep it up, please."

"From the moment I stepped into your store, I knew there was no other place quite like Gallery Furniture. The salespeople were efficient and friendly. This furniture is beautiful and well-priced. What a deal. Thanks."

You see how the experience resonates in all of those. The experience is just as important to the customer as the furniture. So, as Dr Deming said, we have to stay ahead of the customers and provide the customers with a better experience.

We decided we would have fun in retailing as part of giving the customer a better experience. You see the car pictured on the screen? We're giving away that car this month. We also give customers a basketball. Basketball is big in the United States, especially in Houston. If a customer fills out a credit application, we give them a free basketball that, of course, has "Gallery Furniture" all over it. It gives them a memento of the occasion, and they take it home. It's the small things that make the difference in retailing. Nothing is more interactive than bouncing a basketball or soccer ball. We also have bowling alleys in our new addition to the store, where the customers can have fun and children can bowl while the parents are shopping for furniture.

And the big Trojan Horse is the giant playground we put in for the children. Most furniture stores are about as exciting as going to the dentist. We wanted to make Gallery Furniture fun. And let me ask you this: What other furniture store in this world do you know of where children cry when they have to leave?

I'll mention some other innovations that we have. I learned from the guy who did the Caesar's Palace mall in Las Vegas, one of the best retail designers in the world, that people are very familiar with televisions. Furniture stores seem to be lonely places. But when people see television they gravitate to it because they're familiar with it. So he suggested we put about 500 televisions in our store. And it's funny to see people go toward that television, watch a scene from their favorite movie. It reinvigorates them, and they go back to shopping some more.

We also have a sports memorabilia center where we have lots of basketball shoes on display, in particular the shoe from Shokeele O'Neill size 22. We have different themes in our departments, so that the customers can have fun in the store. And we have lots of it.

Another thing we learned: people like to do things that are interactive. "Interactive" doesn't necessarily mean high-tech like a Powerpoint presentation. What's more interactive than snacks? We have goldfish, pretzels, and candy there for the customers to eat. Customers love it because it puts a sweet taste in their mouth. The only problem with those goldfish and candy is the fact that I have gained ten pounds and raised my cholesterol. And we also have a restaurant for the customers. A lot of customers, when they make a buying decision, have to go through a process of thinking about it. We learned that people quite often say: "I've got to go eat and I'll come back." So instead we put a retail restaurant in our store where customers can eat and actually go through their thinking process while they're still there. We have about ten live parrots in there. And it's an amazing thing. One of the legends in the American furniture business was a lady named Mrs Rose Bunkin at the Nebraska Furniture Mart. She was still retailing when she was 100 years old, driving around in a little cart. She was a little lady: she could get away with it - I certainly couldn't. She would go around to the customers, and they'd talk to her about price. They'd want to dick her on the price, and she would look at them right in the eye and say: "If you don't buy this, you're stupid!" So, we're trying to teach those parrots how to say that.

Now, Dr Deming talks about improving the system, the system being all-encompassing. One of the biggest problems any business has is hiring the right people. So we ran into a group in Houston that uses this thing called PersAnalysis. They use colors to tell you what a person's personality is going to be and what type of jobs they like - red being a very hard, driving, direct person, yellow being an outgoing person who likes people, blue being somebody who's very studious, and green being somebody who is very settled and wants security more than anything else. In case you haven't guessed, I am a very red person.

We use these PersAnalysis profiles to help us hire the right people. And if you hire the right person, somebody who will like being in Sales, somebody who will like being in Delivery, somebody who will like being in our unloading department, somebody who will like working in the financial department - when you hire the right people then that's 90% of the battle. So we spend a lot of time in pre-employment screening and quite a number of hours finding the right people for the right jobs. Then we can hire then and they can stay in work and develop, and they love their job. It's called constancy of purpose. You know, a bright man taught me one time: find a job you love to do and you're not going to have to work a day in your life.

Why can't going into work be as much fun as taking the day off to go play golf? That's what we're trying to do: make work fun for people.

Point no. 14 in Dr Deming's management philosophy: Just do it. That's what we try to do. We try to talk about constancy of purpose, being the mission and the aim of Gallery Furniture. 'The mission is to delightfully exceed customers' expectations with quality products and services, to help make all the associates rich in mind, spirit and pocketbook, to benefit the community where we live, work and play.

The aim, as I've been over many times, is to please customers, sell and deliver furniture, produce income. That's what we do. We're trying to sell furniture. We do not want to raise antiques. That's what we do at Gallery Furniture.

Cooperation:

Understanding the business of any business is real simple. It all boils down to the people business. We're not in the furniture business: we're in the customer business, in the people business. There's 500 retail outlets in Houston that sell furniture. However, we're selling an experience. We're selling service. We're selling our employees to the customers.

Understanding the business is dealing with people, figuring out how to make lots of positive interactions, and working with people like sailors working with the wind. It's constantly shifting: variation - you have to constantly adjust. But that's the way it works.

Balance:

We're trying to balance the sense of being an individual with the sense of being a team member. We want people to understand that it's important for them to do things individually, feel good about their accomplishments. But the overriding thing is that we all work together and avoid the natural entropy of breaking into fragmented parts where the different areas compete against each other. We're not going to have that.

Systematic improvement:

96% of all improvement gains come from improving the system. One of the reasons I put that bowling alley in the store is a bowling analogy that I learned at one of the Deming seminars. Say we're on a bowling team together, and we've been doing it for five years. My average is 150. And all of a sudden we get a new team captain on the bowling team. And he tells me that within the next six weeks my bowling average has to go up from 150 (it's a steady system) to 190, or else I'm off the team. Unless he shows me a better way to bowl, there's no way I can improve my average because the average is steady. So what we try to do is work on improvement gains coming from the systematic improvements - whether it's improving the store, whether it's a better hiring system, whether it's fun for the customers. It's all a matter of improving the system.

Only 3 to 4% can come from individuals' heroic best efforts. Dr Deming talked about Profound Knowledge, as did Peter Scholtes this morning. Systems thinking, knowledge of variation, understanding of psychology, and theory of knowledge. Probably the biggest thing I've learned in my last five or six years is the understanding of psychology. I did a speech in Bristol the other day, and I understand that the feedback after the speech was that I was quite autocratic. I used to be in my younger days. However, I am learning now through Profound Knowledge and knowledge of psychology that the greatest human need for any of these employees or people that work for us is to feel appreciated. And so we try to go out of our way to make the customers and especially the employees feel appreciated. 'Me greatest human need is to feel appreciated. And that comes from understanding psychology.

We're in the people-delighting business, pleasing internal as well as external customers, buying and selling quality products, solving real problems realistically with our suppliers, with our customers. First-time buyer financing, providing what the customers want, care for the non-buyer. Sometimes people leave the store upset, so we have people trained for this at the front door, asking: "What's the problem?" It's very important for us to know. It may be that we said the wrong thing to them, it may be that their credit got refused. We want to do whatever we can to make them happy. And, of course, to give the customers a sense of surprise.

Tennis

I'm a very impulsive person. In 1993, I was approached to sponsor what was then the Virginia Slims tennis tournament in Houston. They couldn't use Virginia Slims any more because they couldn't have a cigarette company sponsoring the tennis tournament. So the guy said: "Make me an offer for this sponsorship." I gave him a low-ball offer and, to my absolute surprise, he took it! So we changed the name of this women's' tennis tournament to the Gallery Furniture Tennis Classic.

The winner that year at the Westside Tennis Club was this marvelous person that my wife and I met named Steffi Graf, the best tennis player in the world. And when I did the sponsorship, one of the agreements that I had made with the people from IMG who ran the tennis tournament was that one of the players would have to go to one of the elementary schools we'd kind of adopted at Gallery Furniture and speak to the young kids. It was a very low-income school. And, to my surprise, the person that volunteered to do it was this wonderful person named Steffi Graf. At that time she was the Number I tennis player in the world. I said earlier that the greatest human need is to feel appreciated. So Steffi came out in her limousine that day to this little school, full of hundreds of low-income black and Hispanic children there in Houston. And in the back of the school they had built a makeshift tennis court on their asphalt parking lot: it had loose asphalt all over it.

One of the teachers there at the school happened to speak German. And she taught all the students there how to say "Hello, Miss Graf - Welcome to Houston" in German. So Steffi Graf stepped out, dressed to kill, to see these kids. And they all started talking to her, chanting in German: "Hello, Miss Graf - Welcome to Houston." Here was the Number 1 tennis player in the world, loving these kids because she felt appreciated, tears running down her face. And to my utter amazement she kicked off her shoes and played barefoot tennis with those kids on that asphalt for an hour and a half.

So impulsively I jumped into the tennis club business, and I'll tell you about that in a minute.

But I am a very impulsive person. I went out and bought that tennis club. Let me tell you of one other impulsive thing that I did many years ago. Anyone know who Chuck Norris is? He's a world-famous movie star. He stars in the best TV series in the United done lots of movies. Anyway, one day, back in 1993 I think, I was at birthday party - Marvin Zimner was one of these local TV personalities in Houston. I was a charity auctioneer, raising money for the heart fund. And, while I was at that auction, a friend of mine dragged me across the room and introduced me to Chuck Norris. I'd always wanted to get into the' movie business. He told me he was, doing a movie in Houston called Sidekicks, also starring Bo Bridges, Joe Capiscopo, Jonathan Brandesmere, and several other people.

So my wife and I (and I was very impulsive: she didn't agree to it, but I did) agreed to be the executive producers for that motion picture called Sidekicks. Being the executive producers meant that we were the suckers who put up the $10m dollars. So we put up the $10m for this film. We had a distribution deal with a Hollywood studio: they would distribute this movie to the theatres across the world and the video stores so that we would get our money back. Well, at the end of the day, the Hollywood boys looked at the movie, and said: "There's not enough sex and violence in it. We're not going to distribute it for you." But my wife, James' mother, is a go-getter: she's not a quitter. And she and Chuck Norris and his entourage went on a 30-city tour and distributed that movie around the world. And I'm proud to say that at the end of the day we ended up making money on that movie named Sidekicks.

Somebody asked me the other day what I learned about the movie business. I learned I should stay in the damn furniture business.

Anyway, on to the tennis club business. Now, we bought this tennis club. And I knew that if I bought that tennis club we would have to have a unique selling feature, something which would differentiate us from all the rest of the tennis clubs in the country. The problem with tennis clubs was the system. Tennis is not nearly as popular in the United States any more as it is in Europe. And nine out of ten tennis clubs in the United States were going broke. I don't know why I bought that tennis club, but I bought it. The problem was that the tennis club system all revolved around the tennis pros. They all got paid on commission based on how many lessons they did, how the junior program went, and all that type of thing.

When we bought that tennis club, they were closing it down because it was broke. But the head tennis pro was making $150000 a year. And I thought to myself: "There's something wrong with this picture." So we decided that we would change the system and do a Dr Deming management system at the Westside Tennis Club.

So the first thing we did was come up with the unique selling feature, something the customers would want. What would the customers n-miss if we were to go out of business? We're now the only , b in the world that has all four Grand Slam tennis surfaces. We had this beautiful red clay tennis court that the people who built Roland Garris came over and built in our tennis club, the only ones in the US, the red clay for Roland Garris. We had seven grass tennis courts that David Kempton, who is the greens keeper at the Queens Club in London (I was there yesterday) built for us. We have rebound ace tennis courts like they have in the Australian Open. And we have American hardcourt tennis courts.

So we had a unique selling feature. But we decided that if we were going to change the business then we had to go all the way in the Deming system. So we decided first of all to pay all of our tennis pros salary not commission. Half of them quit, but the other ones stayed. We decided that, when working with the members, the tennis pros should do things other than think how much money can I make out of you? Now the tennis pros give free lessons every week and free clinics to our members, and the members just love it. We have free basketball clinics. We also have a big basketball gym there. We have free activities.

Before, at Westside Tennis Club, the dues-paying members used to run the leagues and the tournaments. The restaurant at the tennis club charged them for food and drinks for all of the events. The pr-o-shop charged maximum for all tennis balls and other equipment. The league struggled and the tournaments lost money. Now the Club runs the leagues and the tournaments, and lets the members have fun.

No departmentalization. Members bring their friends in to join Westside Tennis Club, and I'm proud to say that the Westside Tennis Club is now the most profitable tennis club in the United States - because of the Deming method.

We're also the official practice facility there for the Houston Rockets basketball team, the 1994 and 1995 world champions in basketball, and that's another selling feature of our tennis club.

I'm going to tell you a quick story about Westside Tennis Club. It was a very interesting place there because of our gym. Last summer, during the NBA lockout, none of those players had a place to work out, all these world-famous basketball players. In particular, one giant of a man was there all summer long. His name was Shokeele O'Neill. Shokeele O'Neill makes about $15m a year playing basketball. One day, after working out in the gym, he was up in the restaurant eating lunch. And as he was up there eating lunch, my wife Linda happened to walk by. And Shokeele said: "Linda, I really like Westside. I'm going to join. How much does it cost for membership?" Well, Linda called me up at Gallery Furniture, and said: "Mac, Shokeele wants to join Westside. Shall I sell him a membership?" And I said: "Absolutely not." She was shocked, because she knows I'll sell anything. She said: "What should I do?" I said: "Sell him the whole damn place."

I'll tell one more quick basketball story. It has to do with team sports. I'm sure you have ,professional sports here in Great Britain just like we do in the United States. As I said, the Houston Rockets won the NBA World Championship two years in a row, 1994 and 1995. At that time they were a team. The players didn't care about their statistics, they didn't care about who got the glory, they all worked together for the good of the team. It was a total team effort and there was no resentment among the team members. Well, when they won the two championships, they had tow superstars. Then they brought in a third superstar Charles Bartlett. And then all of a sudden the team went to pieces because every body started worrying about their individual statistics, who got the most space in the newspaper, who got the most glory. And the team hasn't been the same since. The basketball team that is about to win NBA World Championship this summer is from a little bitty town, San Antonio, Texas: the San Antonio Spurs. I know a lot of those guys very well. All summer long, all five of their starting players were at Westside Tennis Club working out. They don't care who gets the glory: they work as a team, and the team wins. It kind of reminds me of Dr Deming's system: together everyone accomplishes more. Easy to say, hard to do, but it certainly makes for great results.

At Gallery Furniture, all these years we've only had one location. 'The reason is we wanted to be able to control our quality, give the best possible service to our customers. Also we didn't feel like we were ready to branch out to multiple locations. I have a very definite theory when it comes to multiple retail locations. I'm sure this theory is so brilliant, so profound, that it will get me written up one day on the front page of the Wall Street Journal Business Section because of its profound influence. Here's my theory on one-location retailing: They can only steal so much while I'm watching them.

We've always wanted to have multiple locations. So we came up with an idea. Dr Deming said: "Go to where the customers aren't." Think ahead of the customer. We came up with an idea wherein we could have ten million locations rather than one, with basically the same amount of dollars invested. It's called GalleryFumiture.com. In GalleryFumiture.com our vision is to innovate, to get people into the store without actually being there. People now can go to our store from around the world. You punch in www.GalleryFumiture.com. We have a system of about 50 robotic cameras in the store. The customers can actually control those cameras and zoom in on the piece of furniture they want to buy. It's an amazing innovation that some of our people came up with; my son James and our computer guy Walter came up with this innovation. So now we have ten million locations around the world. People actually buy furniture over the Internet. We deliver it to anywhere in the continental United States in seven days or less - which is faster than they can get it from their furniture store down the street.

Sometimes when you make these innovations you don't know where it's going to take you.

A good example: About a month ago we had a lady in, she had just moved back from Saudi Arabia. She and her husband work for Aramco, her husband is still in Saudi Arabia. So she was thinking about furnishing the whole house and making some major purchases. And she was ready to do it. But her husband, being in Saudi Arabia, wanted to see the furniture. Well, she called up her husband on the phone. He got on the Internet, and pretty soon he was looking at his wife standing by the different pieces of furniture they wanted to buy. They bought $10000 worth of furniture because of that innovation.

So we're trying to innovate and constantly stay ahead of our customers. We feel that, by investing in software rather than bricks and mortar, not only can we be more profitable for Gallery Furniture but we can also give the customers better service around the country.

Our system is set up so that all of our salespeople welcome the idea of making more sales over the internet If our salespeople were paid commission rather than salary, they'd fight us on the Internet tooth and nail. They wouldn't want it because they'd be afraid it would be taking away from their income. A lot of our Internet sales of course are now coming from Houston people who don't want to drive the 50 or 60 miles to our store. But they already know our brands, so they're buying from us. Right and left, it's been a tremendous innovation. And, because of our system of cooperation not competition, we can use this fabulous tool called the Internet. We have these live cameras so that people can get on-line and buy furniture right there over the internet

We have reams of statistics. Our challenge on the Internet: We've had over a million hits so far this month. Our conversion rate of hits to sales is not real good, so that's a challenge for us.

I have talked at length here today about Gallery Furniture's strengths and opportunities. One of the other things I do to try to stay in touch with our customers is to surround myself with lots of young people. I think, in order to stay abreast of what the customer wants, we have to surround ourselves with young people, to come up with new ideas. I learned this from a guy named Vince McMann. He's the head in the United States of the World Wrestling Federation. Now you may laugh about the World Wrestling Federation, but they regularly outdraw American Football on television, they have such a huge audience. He's a guy who is 55 years old, but he always listens to the 18-years-olds' radio station so that he can stay in touch with young people. Staying in touch with young people enables you to embrace new ideas, embrace change. They come in with no preconceived notion of how it's supposed to be done. They're eager, they're energetic, and they're always challenging the status quo. I think Dr Deming would approve.

Also, being around young people, I've learned a new language. I learned that when they say: "I got the hook-up", it means you have influence. I learn when they say: "I feel you", it means they understand you. And I learned when they call you "Dog", it means you're something good!

Areas for improvement

I've talked about Gallery Furniture so far in respect of using the Deming method for our strengths and our opportunities. Now let me talk about our weaknesses and areas that we must focus on to improve, to continually grow the business.

Probably over the last three or four years I have focused too much on customers, sales and profits. Customers, sales and profits are the glitzy and sexy end of the furniture business. The back end, delivery and distribution, is the hard part of the furniture business. We need to improve upon that. At Gallery Furniture, one of our biggest challenges right now is building up our Human Resources department - even though they don't have a lot of direct contact with the customers - to do a better job of recruiting the right people, to put them in the right slot for the right job. What makes any good company work is the people. So we have to build up our Human Resources department.

Also, one of the challenges we have is our warehouse: it's hot and it's hard work. We need to be able to make enough profit at Gallery Furniture to raise the pay substantially of our warehouse workers and improve the warehouse creature comforts, their conditions - like putting a gymnasium in there, putting in a childcare place, so they can bring their children and not have to pay for childcare. And I think if we do that then we'll have more longevity in our warehouse employees.

Also, on a daily basis, I have to do a better job of making all the employees feel appreciated. As I talked earlier about Steffi Graf the greatest human need is to feel appreciated. One of the guys that works for me is named Mike Thorton. Mike Thorton is a Congressional Medal of Honor recipient, the highest award you can receive in the US military. In fact, he trained over here with the British SAS for many years. Mike is a very hardened guy. You wouldn't think he needed a pat on the back. But I have learned, in working with Mike over the last six months or a year, that again the greatest human need is to feel appreciated. When you pat him on the back he'll run through the wall for you.

Also one of our challenges is to put people on special non-selling tasks such as a Gallery Furniture card-holders marketing program, a Houston Community outreach program to market outside of the store, not just inside. And we need to get back to using statistics to track our deliveries and improve our customer services as far as our delivery and our warehouse systems.

At Gallery Furniture also we have to develop a team of up to 30 employees who are focused on GalleryFumiture.com and look at that project on a long-term basis, not short-term.

Also I need to become a better teacher of Dr Deming's philosophy of the big picture, holistic. Too often, even at this late stage in my career, our salespeople don't see the big picture. I'll

give you an example. We have a lot of big people who come into our store, and they buy recliner chairs. I would call them "fat" but that's not the right thing to say: they're "dietetically challenged". And the reason they want to buy a recliner chair is so they can sit in it and eat all the time. That's why they're heavy. The problem with these recliner chairs is that they break all the time when a big person sits in them. So it's a difficult task to get the salesperson to convince the customer that this is not going to be the best product for you. Here's a heavy stationary chair which is going to last much longer. It's all a matter of getting the employees to see a bigger picture.

We have lots of strengths, we have a lot of opportunities, we have some weaknesses and threats. I guess our biggest threat at Gallery Furniture is the fact that Star Furniture, our biggest competitor, is owned by Warren Buffet who owns Berkshire-Hathaway. He's the second richest man in the United States behind Bill Gates. We have a challenge from them. They're very good competitors. They're very well-financed, but we've got to do things better, faster, cheaper. We've got to delight our customers to stay ahead of them.

Another challenge I have is overspending on marketing before this GalleryFurniture.com is ready. And of course the biggest challenge that we have every day is not letting the market pass us by. One of the biggest challenges that we have is not taking our success for granted. And never taking our customers for granted, because each customer needs to be treated specially, just like every employee needs to be treated specially.

When I was in the movie business and met Joe Copiscopo, he told me a very striking story about customers. Let me relate it to you. Joe is a guy who had an up-and-down acting career, and over the last several years he's been working in the blue collar show business. He's been working on Broadway doing the musical: Grease. They do eight shows a week (they're off one day and have matinees on Saturday and Sunday). So he was working a lot. And Joe told me about Christmas Eve a couple of years ago. He had to drive in from his home in New Jersey and leave his wife and his family on Christmas Eve to go in and do the show. He said he was really down that day. He did not want to do that Broadway show Grease that night. He felt sorry for himself for having to come in and work. So he and several of the staff, the cast members, had talked before hand about how they were going to do the show in a hurry so they could get home and spend Christmas Eve with their family. Certainly a thought that any of us can relate to.

Before the show started, Joe had to do a 30-minute monologue to warm the crowd up. And, as he was warming up the crowd, he noticed an elderly lady, about 70 years old, with her 40-year-old daughter sitting in the front row. So he struck up a conversation with them. He learned they were from his home town in New Jersey, which was a nice coincidence. And he asked them: "Why are you here tonight on Christmas Eve?" And the elderly lady said: "Well, this was our Christmas gift to each other, to come and watch you, Joe, because you are our favorite actor." He noticed that the elderly lady had a wedding ring on her finger. And he said: "So where's your husband?" She said: "Well, he's at home. We could only afford two tickets, so he let myself and my daughter to come."

And at that point, he thought to himself: "What a jerk I am. I'm going to give a below-average performance, and this is these people's whole Christmas."

We try to remind ourselves every day that, when a customer comes in, it's a big event to them, and they need to be treated specially. And it's a big event to those customers every day and the employees to have myself and the other managers say: "Hi. How are you doing? You're looking great."

Our challenge at Gallery Furniture is to stay on the Deming course that we have learned. When I read the Wall Street Journal and other newspapers, and I see these companies getting quick gains and quick successes, it's easy for me to relate cause and effect, and say: "Well, maybe I should do it that way." But I know the Deming way is the right way, because it works for us. So at Gallery Furniture we've chosen to stay the course and grow the business long-term through Dr Deming's methods, which make it better for the employees, better for the customers, better for the community, and better for all of us.

I would like to thank my son James for all the work he's done helping me here today. I would like to thank the wonderful support I've had: people here have been so good to me. I would like to thank Roy from the Bristol BDA Regional Group for helping me in Bristol. And I'd like to thank Alan Mossman for the incredible job he's done at helping me out with this speech. But most of all I'd like to thank the other presenters for all that I will learn from you here the next two days.

And, in finishing, I'd like to talk about the last time I saw Dr Deming. My son James was very young back then in 1993, and he went to that seminar with me. It was a four-day seminar. At that time, Dr Deming was 93 years old. He weighed less than 100 lbs., and disease had pretty much ravaged his body. He had a big oxygen tank on his belt, and they were pumping oxygen in through his nose. So he did this seminar all day Tuesday, all day Wednesday, all day Thursday. Friday was the fourth and final day there in Houston. We were sitting up towards the right of the front row. He did the first hour and a half's lecture that Friday morning. He was coughing and wheezing, having a hard time getting through his notes, and shaking. And came time for the first break there at 9.30 in the morning. One of the seminar participants came up to him and said: "Dr Deming, you're old, you're tired, you're sick, you're coughing and wheezing. Why don't you cancel the next six hours of the seminar, and go home and get some rest? Nobody will get upset. Everybody here will understand. Why, why, why are you doing this? Why are you punishing yourself?" I'll never forget: Dr Deming looked him in the eye and said: "I'm doing this because I have a responsibility to make a difference."